my truck randomly got power homeshare backup

[HaulingAss]

This question was about value and loss thereof. He literally said in the post "I'm a long-time stock investor and it works the same way. You don't take a loss unless you sell." That is incorrect. The loss is already there based on today's market price, whether a hard asset or shares. I didn't make the segue to the stock market.

It's indisputably true that you don't "take a loss unless you sell". Even Uncle Sam recognizes that fact. While it's true that your net worth will be lower if an asset declines, it does not follow that you have "taken a loss". Your misunderstanding is of the phrase "to take a loss". I'm not saying the asset has not declined in market value, I'm saying that is much different from actually "taking a loss".

I am a longtime financial analyst, financial advisor and CPA, have taught graduate level finance at Johns Hopkins for over 30 years. This is one of the most repeated and most incorrect myths in investing and asset purchases.

I can see that your background in accounting and financial advising explains your misunderstand of what it means to "take a loss". I gave up on financial professionals over 30 years ago and my life has improved by leaps and bounds because of that wise decision. I found classically trained financial professionals utterly incapable of understanding risk when it came to the kinds of companies I most wanted to invest in.

While I agree that an asset can be sold at any time at the current market price, things like the stock of a public company or a vehicle are generally purchased with a plan. When I buy a stock I buy it for the future value I see in the company. I do not buy any stock with the idea that if it appreciates 20% in a month or a year I will sell it, I sell it when I no longer think it has a good chance of enough appreciation to make it worthwhile to continue to hold. And the value of a volatile stock of a company like Tesla rarely reflects a rational valuation based upon future prospects. That's because Tesla has advantages that most Wall Street financial types, fund managers, accountants and financial advisor types can't even understand. They can only value the company by looking at past revenue streams, and trying to project those into the future. And financial types are loathe to try to look much past the current sales trends or, at best, next years estimated earnings. And if you want to maximize profit and minimize risk, that is absolutely the wrong way to go about valuing disruptive companies.

Public company shares are completely fungible. What you paid for them is completely irrelevant in today's buy/hold/sell decision. They ONLY thing that matters is whether you would buy them today at the market price today. If so, hold. If not, sell.

I agree in general, but this is highly over-simplified. Taxes matter too, often tax considerations are the over-riding force. This is why I often hold shares in a company that I would not buy at the same price. Often I am holding highly appreciated shares, the selling of which would be close to 100% capital gains. For example, the cost basis of the Tesla shares I bought in June of 2019 was somewhere around $12/share. When TSLA recently rose to $480/share, the selling of even one of those shares for $480 would have incurred capital gains tax on $468 on each share and the tax on that sale would have been due a few months later. Every dollar I pay in capital gains tax is a dollar that cannot continue to compound over the long-term. It pays big time to let your gains continue to compound tax free.

This approach is repeated often by FA's talking their business, but it is 100% false. We never "recover" market declines in share values - shares may move back up to or above what we originally paid for them, but it isn't a recovery - it is simply a gain from the last time we decided not to sell. This isn't semantics - it should be core to how folks think about investing. Anything else is a basis trap - a psychological trick we play on ourselves using irrelevant data (our original cost - that money is already gone).

If it's a psychological trap to ignore short term losses in net worth so I can procrastinate capital gains taxes then it's a "trap" that has allowed to profit to a degree I never thought possible. This is not unique to TSLA, I've been long-term investing in very high growth companies for over 35 years. Financial advisors said it would be wise to take profits on some of the gains, to "balance my portfolio". It is only wise, they said I needed to be financially responsible. They thought the companies I was holding were over-valued, "too risky" they said.

I told them they didn't have a clue what real risk was, that I would actually risk more (potential gains) by selling them (than I would risk losing long-term value). Volatility is not a risk, unless you are leveraged and forced to sell when the price is at a low. They looked at me like I didn't understand risk. So I fired them. And am I glad I did, their heads are so full of financial crap that passes for financial wisdom that they can't even see the forest for the trees. Financial "professionals" exist to take a cut of investment profits under the guise of preventing losses and smoothing things out. But it's really a scam because the very premise of their value causes them to be short-term risk adverse. Your portfolio will die a death of blandness. And to add insult to injury, they will then take a cut of that. I'm so glad I never listened to financial professionals. And the wealth just keeps multiplying.

Put simply: Every time we decide not to sell a stock, we are making an affirmative decision to buy it today at that price. That's the beauty of market investing - liquidity. The calculus is slightly different for illiquid assets with transaction costs and actual utility (eg transportation in the interim) like automobiles, but the principle is the same.

But the concept under discussion was about whether a person "takes a loss" when the market value of an owned vehicle declines. Only if you sell the vehicle will you realize (or take) a loss. A realized loss is a synonym for "take a loss". I buy a vehicle planning to utilize it until it is no longer reliable, cost-effective to own or I simply lose interest in it. This is generally at least an 8 years. But I do not buy a vehicle as a monetary investment, vehicles are something I spend money on, I do not anticipate appreciation or selling them early. Which is why I mentally write off the cost upfront, upon the purchase. Sure, your calculated net worth declines with declines in market value of owned assets, but you only "take a loss" when you book that loss by selling. Sure, it's value is going to decline every year, but that has no practical consequences unless you want to sell it.

That said, if you are the type of person who plans on selling your new vehicle a year after purchase, then you will absolutely "take a loss" if it declines in value over that year (and you actually sell it). And you can pretty much count on new vehicles to decline most rapidly in the first year or two. But you do not "take the loss" if you don't sell it, because to "take a loss" is a synonym for "realizing a loss", which is something you admit only happens when you actually sell. It seems that you just don't understand the semantics of what it means to "take a loss" vs. a decline in net worth. A decline in net worth doesn't have any tax consequences, taking a loss does.

This conversation just reminds me how glad I am I haven't been paying professional financial advisors all these years. I do pay a CPA to do my taxes, and I'm glad I do, because the last thing I want is to be poring over arcane and complicated tax rules for hours and hours just to save a few thousand dollars. I want to focus on where my time is best spent, investing wisely and enjoying life. I've never cared a hoot about the value of my used vehicles. I run them into the ground (or now days I sell them cheap/fast or give them away when I see something better).

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